CIM - Earnings call transcript Q1 2022 | Chimera Investment Corporation

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Operator

Good day, ladies and gentlemen, and welcome to the Chimera Investment Corporation's First Quarter 2022 Earnings Call. All lines have been placed on a listen-only mode and the floor will be open for questions and comments following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host, Victor Falvo, Head of Capital Markets. Sir, the floor is yours.

Victor Falvo

Thank you, operator, and thank you everyone for participating in Chimera's first quarter 2022 earnings conference call.

like the I'd harbor begin, we to safe review statements. Before

you statements making call, statements which These risks current and we in subject this are forward-looking Risk from that forward-looking and section and about based assumptions results expectations events disclaimer will in filings. these events. statements. earnings uncertainties, addition SEC forward-looking other During Actual to or Factors release be our statements, the most are and to on quarterly recent to projections We our in our are encourage future outlined differ which are statement annual annual the predictions, materially read and in may filings. quarterly

of undertake our our SEC and I call. turn for the Chief today, most GAAP this earnings that information. conference for may date will supplement this disclaim call comparable accurate Mohit Officer, Investment update filings the may reconciliation and revise to information to time-sensitive the over call specifically Additionally, only is this non-GAAP obligation the and as or of conference we of not CEO to the financial now contain content do measures discuss earnings Marria. We any During refer also measures. Please

Mohit Marria

welcome earnings the Corporation. XXXX Vic. Investment Good Thanks, morning and for call to Chimera first quarter

which my our financial After $X coupons. long-term our by Joining optimizing Viswanathan, Markets. Officer; rate prepare with for included Financial Chief our then results, structure, me we on Operating environment a year, for fixed the open of and higher call Vic Capital questions. today we are Last and liability will of Choudhary Chief loans rate Officer; Subra billion Yarlagadda, resecuritization our the Subra to call review the of will our began Head President Falvo, remarks, and the

the higher opportunity value, At XX% rates combination XXX of pronouncements increase The treasury volatility Chimera over this long-term ten strategy than continuing of through spreads, we began securitization. credit residential began have widening late XXXX. by and new next basis yields impacted occurring agency and available began rates current acquire residential rates book causing of rise last swiftly announced loans headline this and to Markets interest points treasury to possibly raise to our purchases This to quarter financing short-term by portfolios. which approximately for all Fed while of environment time, inflation stop to will year, XXX basis in increase of Board year. basis MBS and XX mortgage last securities and quarter. quarter. of two-year implementation year high to Reserve increased our Federal its obtain notes dramatic points, first increased the first same reduce much and mortgage-backed XX investment The our which points, created As begun portfolio by were continued treasury reacted of course the during rates increase high-yielding down of for at yields to was higher year, the the the leg loans year it

quarter This loans. of $XXX acquire we residential million to about reperforming committed

We quarter. have second loan the settle settled early loans warehouse $XXX in million on the and expect remaining into to our

enabled period. us activity, the in purchase the loans coupled in nearly loans late of X with New purchased settle settlement XXXX, billion to on

rated securitizations an coupon. institutional by by immediately structure In average seasoned residential fixed a more rise. and loans interest first loans loan total, look loans an AAA our rates RMBS, billion turn we year, financing investors. our securitization was $X.X billion, on maturities out secured portion securitized reperforming secured collateralized of one remaining million agreements, The $X.X by $X.X representing mortgage these were ranging average of private our rate commitments. to February, of XX% financing billion our coupon Of $XXX month laddered XX% to XXXX-RX, contribute CIM securities liabilities and years. seasoned. million. duration as a mark-to-market sold of only investment. for our have XXX are have used or of repo to continue aggregate from balance the subordinated and add Securities kept of a and XX% to sheet. been agency to the securitizations. This million used assets. notes debt this includes arrangements intentionally was and X.X%. billion from $X.X of capital of our which principal management our and that outstanding X.XX% secured the The financing limited would were on $XX beginning billion securities XX% a over comprised basis period, recourse our and financing mortgage the acquisitions assets March is has three retained in securitized of our moment X% at XX% secured representing debt the interest-only the of Considering we for finance or our to optimize loans of loans agreements have represent The in with were XX% Securitization shorter for securitized secured feature leverage prepayments mark-to-market structure approximately call has retained $X.X billion balance At of our of of funding. on securities of the features rates up financing maximum to our year-end. to the approximately total the discuss rate We of points of XX% our received capital. CIM months XX portion non-agency our XX% sponsored to or balance an I X.XX%, issued coupons. Fitch only fund expect volatility and of any on mortgage and and our retained We placement $XXX are $X.X end, to as Chimera earnings our non-mark-to-market and of with XXXX-RX The are take structured DBRS of of a senior enable have early fixed rate increase to like worked represented liabilities average pricing We quarter for The with securitized have or of interest time so CMBS. The establish February liability billion XXXX. funding remains our pricing call one underlying $X.X in us warehouse our a we to financing long-term. funding primary structured $X.X $X.X mortgage this billion asset At market full debt, quarter Agency term with to to option flexibility from on is underlying March remaining billion XXst This securities. to and end, our diligently assets. future permanent source XXst provide have rate debt the of of the loans had the

and are of our assets share positioned. place, well has performing million Our are repurchase currently us to common a The believe liabilities $XXX repurchase well up to our company we shares. in which allows plan

benefits have benefit securities in movement of value, securitization. benefit primarily residential investments book high-yielding that price the to Given the plan loans maximize To our to our evaluate accumulated of through added portfolio a to we sharp shareholders. funded the conjunction relative other and the with years, summarize, share the to repurchases long-term been in have we our of several over past share

financing Since potential spreads interest We cost to spread. to our volatility of call for agreement utilizing credit opportunities have optimize locked low have represent and net portfolio secured provisions high this a in and portfolio our dislocation. our the Higher rates financing we of during and for the market rate fixed pandemic, are interest our protect regularly restructured wider periods beginning portfolio.

large to our are at positioned we repurchase will a financial disposal the our share over have Subra over results I review for long-term. believe and now maximize to We turn the quarter. continue call dividend well for the to shareholders the plan to we income

Subra Viswanathan

Chimera's per highlights our end on first share Mohit. book per quarter quarterly an value net per quarter for million, income book change on return you, based and the available first in XXXX. million economic or financial negative review GAAP or On was for per earnings basis, I the Thank XX.X%, of the $XX.XX value was GAAP at will was GAAP first the first quarter $X.XX for quarter share. share. common was share. $X.XX dividend distribution $XXX and for first $XX loss net value book quarter

during $X.XX quarter. the items, one-time called For was of derived from we income nonrecurring securities had that approximately

first economic interest the million. for income quarter was Our net $XXX

ended the quarter assets to the interest on funds spread at quarter, our leverage to yield for X X average first was X.X% was the Total X.X%. X%, average For the X.X interest leverage net and of recourse first while was cost was earning X. quarter our

was And lastly, return on slightly our net our first XX.XX%. equity quarter, remarks. economic annualized was transaction average down from $XX return the XX.X% GAAP and That interest For expenses, average previous servicing negative equity the our excluding million, concludes was on year. fees expenses, and quarter our

questions. now for the open We call will

Operator

Thank for your Instructions] first you. The floor state Okay, comes [KBW]. Bose [Operator from our is questions. open now questions. question George Please

Mike Smyth

Bose. for Hi. Smyth Mike is actually This on

reflect provide pressure Just changes you follow-up, And Just as older the you any wondering securitization a the Can spreads has markets. of the whether some up. seen of color has one eased loan just not wider securitization inventory to market? prices the some some the if on cleared? in on then or in have

Mohit Marria

your then one. Hi. address Good Mohit. I'll morning, start the question Mike. sort and second of This is first with

of if in of a mortgage lot QX but lower there new the the in significant which significantly market compounded As remarks, of in was irrespective XXXX issuance securitization about volatility. a took I much the absorbed, that securitization rate QX, market pricing deal environment. widening and mentioned in given just happened you're in effect that spreads quite what relation the opening the of market, amount place overhang, credit did A loan the talking adjust widened origination relative was to to

our percentage new and spread that we was space, into I and also bought deals from saw trickled touched which that originators that's in non-QM the RPL smaller some on jumbo where think changed the amount upon issuance the this call rates bring the issuers securitizations. the a was and as QX what unexpected. issue we of coupon originators down much materially of of and fair well production and overall a of And a was widening did through earnings lot that pull

Mike Smyth

helpful. you're just get you comfortable And running offense at? leverage. level on Great. to What's in one And would to market on kind what comfortable at see of going then maybe Great. here? the the maybe That's then need

Mohit Marria

on new loans of we million investment $XXX as I the we plus offensive. We highlighted the to So mean call, have on did the add done portfolio.

so securitization the which far just of doing acquisitions. the you the to Given why market QX, to some the seem we bring asked only stabilize, as one in term loan be finance market deals securitization here we volatility is that of may about, more completed to they

to to Our go turn deploy leverage we recourse in where dollar as up to We the deploy look where said, given I X.X relative evaluate liquidity, total like did investments, ample quarter. going X we're in book relative is, leverage to $X.X hit either to the billion our from our have next to investments. still that stock basis from of value for or of a price the value

the what's of function we type As buy. could leverage a the of composition it's assets far as of the be,

little the agencies, place leverage but the ROE of given more where leverage generate remains more if next focus you to it's credit we cash higher. credit on to would on bit run be focus taken if focused, the will widening the we are would that's assets, in dollar where Our a buy returns, but goes. won determining agencies, compelling But

Mike Smyth

any just value Great. Have book color the and you Great. far your really in That's quarter? helpful second so changes seen to then one more.

Mohit Marria

Yes.

belly quarter. in and to move Given, the year, the book curve X% continued again, the since ten be about end the on of down of we the rates project value the X% to the both

Mike Smyth

taking for Thanks the Great. questions.

Mohit Marria

Mike. Thanks

Operator

Cranston Trevor state Please your next from [JMP comes question. Our question Securities].

Trevor Cranston

morning. Good Thanks. Hi.

move of the you You kind maybe today commented in today the is of the where repricing was and last yield the spreads. available new given Thanks. kind Could on the you're investment purchase on of end go in sort rates what a in of for ROE at it credit year? and market of the interest up through terms widening seeing of price RPLs little and bit versus of loans where

Mohit Marria

Sure.

we loans. acquiring basis out all-in low it Xs yields That of to half to non-QM loan able of part half last in swaps more had optimize but In buy we actually focused didn't level but better are loans our a XXX, that spread side year, number jumbo, deals success to prime were all-in on would new But lost in be whether the we in on So said, the that second high the the sheet, the in year, rate liability balance that widened today. again as maybe yields, we in plus of season yields, mid swaps rates earnings to last has on running produced given In in more lower the has we market. we're highlighted of Like the the loans, the on year, issued mid-XXXs. the years remarks. financing. plus much prior securitization of reperforming the increase probably year, effect isn't were had trading lock first I

also could pieces structure, looking on increased. the at double low based probably of yielding top So moment. has the And the sell the a to capital securitization you digits at retained demand where execute you're

Trevor Cranston

it. helpful. Okay, got That's

terms oh, In sorry. – ahead, of go

Mohit Marria

not I loans that's are last just already will On reperforming this thing is XXX say loan the least – these is being on – depending something side The for make comes month will that the to produced what last season XXX sale. out I average, on market, exists. season, at one comment,

spread controlled and products. of of of Yesterday, widening traded mentioned with the color, has well to early second sort in the I have year. newer that loan their line on Mae occurred it toward had you. the just So some nature in the based the seems Fannie to spreads protected And flow other origination that's

Trevor Cranston

color. good That's it. Got Okay.

the movement In kind of driven sort in the duration of talk rates was roughly could terms in Thanks. the and movement any book of value point? change, this there's the versus of on at net spreads credit much of how you that exposure about by kind portfolio if

Mohit Marria

Sure.

XXX Like movement December a of points basis from The XXX value ten So moved March. to moved function a book lot same basis said, the curve of over about is plus frame. belly to over the the the rates. I time of swaps year points XX

to From to led what sympathy value. in were in movement large a perspective, that So spreads with book agencies. wider a happened credit our

would value, I by was So – say, book was change the that, of XX% driven in XX% rate the movement. change reduction

why, year QX of chatter do. table, more But given yesterday almost been is sell ten and almost, I of the on off. sort in of of And a around five the continued end the since quarter. then X% past point Fed the the move XX% year X% the have have inflation in hike, two, will April, lot has quarter one XX the of occurred we both data As more the occurred XX or I move shows between that ten they which terms the with basis expectations. has they and but down year bit in end, experienced what think, the possibly year, move three what that little rates going moved book potential value point a off in to clarity Fed's to so is announcement, there [indiscernible] taken five that XX% the the of has hikes was predicts and of anywhere on and again, basis to be see sort a think, There far could

rate the little outlook that's move here. the So certainty I half provided as think of back bit into on a more year sort the we of

Trevor Cranston

it. comment. Okay, you. I appreciate Thank the got

Operator

Please Doug [Operator state Harter your comes [Credit from Instructions] Our next questions. Suisse]. question

Doug Harter

kind your up. of can to But the those past, that are still reissuing benefit? job about done you do talk if other and improve that cost relever to and the calling Obviously, potential the gone of a to structure. there get securitizations? liability you've has just the securitizations and Thanks. In good Or releverage of ways

Mohit Marria

either deals That's question. that a do in callable and a calendar that that. amount XXXX, QX we there's a our supplement become call we year in And page of good earnings callable highlighted in fair will or that are the our reflects have

increased from mentioned, that from today negative additional to new And stock. redeploying that do. As significantly would not to that's almost as new debt would to relative issuing debt, equity and if evaluate stands where be But that The it the of we we're that could repurchase today. has attractive were to today, be deploy new continuously that. monitoring the as QX issued you we in equity, takeout the issuing deals debt quite the you to cost even

So we evaluate they do But and as an delever over remain they in will to and deals of to additional once pay those we we'll think continue deals. out call to it able about way month the course equity, outstanding future continue the another each take those year. the that is be to dollar down that of

source a basis. company of go-forward the liquidity is for it So on a

Doug Harter

Got it. And up that that's cost having without attractive equity to ability and of whole to give be building put I the funds? mean, redo securitization I leverage guess, the additional would against there

Mohit Marria

Yes. I be tap to counterparties mean value we notes sort to another into higher additional of would over optimize financing that into the That delever retain borrowings on the that that way as take the securitizations repo repo. of in account form and subordinate those of the we equity. time continue our would of assets could

Doug Harter

the has Got and characterize you ebbs kind of flows. volatility kind the that of I it. comfort how And level of I given market there guess market that your financing? had guess would and of

Mohit Marria

mentioned, I overall rate the given on especially, little extent the move, actually I in company necessarily see geopolitical on, issue you mean performed an has the large and at have And yesterday's and really QX, potential liquidity upon, will that rate stuff we path. Fed if look prefer think today. we are based we opportunities, events increase repo. of are with against don't dealing to current comfortable a relative future well. touched given more and of counterparties would pretty I but financing very as of attractive we the the and with investment that put the has one I the on want clarity is our the We And to market But But we're going there we we cash needs, opportunities. repo the non-mark-to-market again, more the on that overall Yes. market cognizant comfortable tenure, of that We the the where the announcement we're mean, our getting. market to longer leverage we're find given for bit type and financing weigh of type and today we things repo with. cost

Doug Harter

Great. you. Thank

Mohit Marria

Thanks, Doug.

Operator

[Operator Instructions]

Operator

it we And like look any doesn't incoming Okay. further have questions.

So I'll Mohit closing call to for over back the turn remarks.

Mohit Marria

Thanks, operator, joining everyone speaking to for we on us forward call. you look earnings and today and thank our you to QX

Operator

Thank We you call. concludes conference you. participation. for This today's your thank

at lines your disconnect this time, great have and day. may You a

Chimera Investment (CIM) 5 May 222022 Q1 Earnings call transcript